Kings of Yesterday: HP and Xerox’s Decline
For anyone born after 2000, HP and Xerox are names that seemingly hold little to no meaning. Dubbed by the Wall Street Journal as “the two failing stars of technology,” it isn’t a secret that HP and Xerox are becoming less relevant for the younger consumer segment.
Last week’s news of Xerox making a $22 per share takeover bid for HP, highlights such a “failing stars,” status. Carl Icahn, the veteran activist investor behind the merger idea, described the merger as a “no-brainer,” as it would allow both companies to “decline much more slowly.” Simply put, the entire situation reads like a last-ditch effort to survive in a fading industry.
In a world where sustainability has become a trending business value and office spaces are getting digitized, it makes sense that society has seen a downturn in printing demand.
HP, the PV, printer, and hardware unit of the company formally known as Hewlett-Packard, was profitable until this year. As part of their new restructuring program, the company has asked its regional-level senior executives to leave; their attempt to reduce the workforce by 9,000 would supposedly save the company annual expenses of $1 billion. Their public statement revealed their new strategy: to “simplify [their] operating model and become a more digitally enabled company.”
Xerox is no better. With its only potential growth area being 3D printing, Xerox’s sales have fallen 9% in the past two years — a $9.8 billion drop. There doesn’t seem to be anything driving earnings growth and, like HP, the company’s current focus is cutting costs.
When companies begin to dip their toes in corporate restructuring, after running out of ideas for a new market, their decline is unavoidable. It’s practically spelled out: HP and Xerox are dying.
That being said, the merger itself may still be a strategic one.
Xerox’s strengths lie in copying, while HP’s lie in printing. Broadly, their business models, though outdated, complement each other well. What Xerox lacks in print, HP can contribute with their strengths in label printing and digital production. What HP lacks in office and ‘copier-based’ production print is, luckily, Xerox’s forte and main source of revenue stream.
According to Xerox, the creation of an office technology supplies giant (through the merger) could achieve $2 billion in annual cost synergies. Both American companies with a common culture, HP and Xerox embodies a perfect marriage.
However, a textbook business strategy alone may not be enough to save them, especially given the kind of market the merger would be entering.
The sad reality is that the traditional copying and printing business is collapsing, without hopes of a rebound.
The tech industry has always been a dynamic and volatile one. Reaching the pinnacle of such an industry was tough, but staying there proved to be even harder. While companies like IBM, General Electric, Apple and Microsoft have shown that it is possible to survive a few flips of the coin, the decline of HP and Xerox seems to serve as a warning that even the giants aren’t safe from the ever-changing trends that consume our modern world.
